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Open banking revisited: an update on the CMA's retail banking market investigation

There has been some significant movement following the publication on 9 August of the CMA's final report following its retail banking market investigation.Please see our earlier blog on the content of the report and the CMA's proposed package of remedies. The following is a round up of the main activity since the CMA's report was published.

On 14 October 2016 the CMA published an update on the key developments in this area and outlining a number of documents they have published in connection with the implementation of their package of remedies.These include proposals relating to the structure, membership, governance and funding arrangements for the Implementation Entity to oversee the development and implementation of the CMA's open banking remedy.CMA has approved the appointment of Andrew Pinder as the Implementation Trustee, to chair and oversee the work of the Implementation Entity.The Implementation Entity will act as the forum for the discussion and agreement of the application program interface (API), data and security standards which form the CMA's open banking remedies.

The fourth remedy identified in the CMA's report relates to issues identified in connection with SME banking, and in particular account opening procedures which can be lengthy, onerous and time consuming, and a barrier to switching. On 19 October 2016 the CMA published a proposal made by the BBA to standardise account opening procedures.The proposal covers the core set of standard information and evidence requirements, the categories of customers to which this standard applies, the provision of customer information and guidelines on the procedure and a governance mechanism for periodic review.The BBA has also provided a draft of the proposed "standard information set" in an Annex to the proposal.The target for implementation is the first quarter of 2018, subject to completion of an implementation work stream by banks.

Also on 19 October 2016, the CMA published a short consultation on proposed retail banking service quality indicators.This was one of three cost cutting foundation measures proposed by the CMA as part of the package of remedies set out in its final report.The intention of the indicators is that they will help enable consumers more easily compare banking providers.The proposed service quality indicators detail the proportion of customers that would recommend to friends and family a particular bank, both overall and for specific banking services. The proposed indicators follow consumer research commissioned by CMA and published by them on 14 October 2016.

On 3 November 2016, HM Treasury published its response to four specific recommendations made to government in the CMA's final report, including: improving regulatory oversight of the current account switching service (CASS); giving SMEs the ability to carry out "soft searches" for loans that would not affect their credit score; a review into the sharing of certain data about SMEs; and exploring ways in which advice on choice of banks and sources of finance can be channelled to SMEs.The government response is supportive of the CMA's recommendations, and steps are already under way to meet these.The Payment Systems Regulator (PSR) is to be asked to review and report on CASS in consultation with the FCA.HM Treasury is engaging with credit reference agencies and SME lenders to implement the requested soft searching mechanism.It has also undertaken to review developments in sharing SME data by summer 2018.Finally, the response highlights the publication of the Business Finance Guide by the British Business Bank in July 2016 as a comprehensive guide for SMEs, including guidance on selecting the right type of finance for specific needs at each stage of the business life-cycle.

Also on 3 November 2016, the FCA published its response to the CMA's final report, indicating that it will undertake work in connection with a number of the CMA's recommendations.These include:

acting as an observer on the steering group of the Implementation Entity tasked with establishing the open banking standard;

take action in relation to the publication of service quality information to consumers by establishing a temporary steering group to inform their options and then test on consumers;

undertake research to design prompts that are effective in engaging consumers and prompting them to consider their banking arrangements;

undertake research and testing to design alerts that are effective in increasing personal banking customers’ awareness of their overdraft usage and helping them manage it;

reviewing the effectiveness of the monthly maximum charge (MMC) consumers could incur from use of an unarranged overdraft once it has been in place for long enough;

review bank account opening procedures during 2017 to see whether improvements could be made to make consumers more aware of the features and costs of overdrafts;

consider whether additional measures are required to increase the availability of overdraft eligibility tools following the introduction of the Open Banking standard;

attend the BBA convened industry group tasked with standardising business current account opening procedures as an observer.

The FCA are at pains to stress that their role and remit in relation to retail banking goes beyond that covered in the CMA's investigation. As such the FCA will continue to take active steps to ensure that consumers are adequately protected and that competition works effectively in this area.

And finally, on 23 November 2016 the CMA opened a consultation to gather views on the 17 changes it plans to introduce in order to "make banks work harder for their customers. The draft Order is accompanied by a more user friendly draft Explanatory Note. Comments on the draft order are to be submitted by 5 pm on 23 December 2017.

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The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers. Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.

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